Commercial technologies are ready for the Defense Department to use but the Pentagon could more quickly take advantage of these products and capabilities by implementing recent recommendations of a bipartisan commission that is examining how the department can accelerate the adoption of innovative technologies from the commercial and defense sectors, leaders of 13 technology and venture capital (VC) firms wrote last week.
The main takeaway from the Atlantic Council Commission on Defense Innovation Adoption is that “’the United States does not have an innovation problem, it has an innovation adoption problem,’” the 13 industry leaders said in open June 23 letter to Defense Secretary Lloyd Austin.
“While most critical technologies being developed today reside in the commercial sector, they are not being leveraged at the speed and scale required for us to maintain advantage relative to our competitors,” they wrote. “The time required to develop critical technologies to meet the threat later this decade is no longer the obstacle; it is our inability to scale already-developed commercial technologies into production, iterate upon them, and sustain them in the hands of the warfighter. Our window to act decisively is closing every day.”
The letter was signed by top officials at the technology companies Anduril Industries, Applied Intuition, Hermeus, Palantir Technologies [PLTR] and Primer Technologies, and at the VC firms Lux Capital, General Catalyst, Floodgate, General Catalyst, Kleiner Perkins, Haystack, Shield Capital, Snowpoint Ventures and Founders Fund.
In April, the defense innovation commission released an interim report that highlighted DoD’s various attempts to leverage innovations coming more rapidly from the commercial and defense sectors, pointing to the Defense Innovation Unit (DIU) to expand the number and types of companies doing business with the department. However, the report said more “actionable reform” is needed.
The technology industry officials lauded all the commission’s recommendations but point to four specifically that would generate industry interest in working for DoD. A recent realignment of the DIU to report directly to Austin is “an important step” and should be followed up with greater resources to and staffing to work across the DoD, including the acquisition organizations and combatant commands to “reinforce ‘buy before build’ commercial practices, they said.
Another recommendation is to better align capital markets to DoD outcomes through efforts such as allowing VC-backed small businesses and publicly traded small companies to compete for Small Business Innovation Research (SBIR) grants, have the new DoD Office of Strategic Capital “leverage external capital market funding for pilot projects” and allow the SBIR program to be able to go directly to Phase III grants, which offers benefits such as sole-source contracts, exemption from small business size standards for procurements, and unlimited dollar amounts for a procurement.
The third recommendation is about incentivizing technology companies to work with DoD by increasing the likelihood that the department will acquire their products. This would be achieved through a “balancing” of the procurement, and research and development (R&D) budgets by increasing the procurement spending by more than $20 billion to obtain production quantities faster, which would leverage commercial investments in R&D. The industry officials also want Congress to raise the threshold for cost accounting standards (CAS) from at least $100 million, which would loosen accounting standards on federal contract for smaller businesses.
The fourth recommendation is increasing the chances for technologies that perform well in experimental and operational exercises to be acquired at scale for warfighters. This would “help vendors cross the infamous ‘Valley of Death,’ and incentivize new nontraditional companies to work with DoD,” the industry officials said.
If DoD does not implement these and the other recommendations of the commission, the department will miss out on “a unique opportunity for genuine reform in the “decisive decade” and allow the nation’s adversaries to “continue to gain ground on the technological battlefield,” they said.
The Defense Innovation Adoption Commission is being co-chaired by former Defense Secretary Mark Esper and former Air Force Secretary Deborah Lee James.